"Regulation has a powerful impact on innovation. It can stimulate ideas and can block their implementation. It can increase or reduce investment risk – and steer funding towards valuable R&D or tick-box compliance. It can influence consumer confidence and demand – and determine whether firms enter or exit a market."
This paragraph neatly explains why the UK government's White Paper on "Regulation for the Fourth Industrial Revolution" is so significant. The UK is considered a global leader in structuring effective and proportionate regulatory frameworks. But the White Paper acknowledges that the speed of change driven by digital technology means that the facilitation of innovation needs to become a regulatory priority if that leading position is to be maintained. It considers the need for reform to be urgent, citing that 92% of businesses from across the sectors believe that "they will feel a negative impact if regulators don't evolve to keep pace with disruptive change in the next two to three years".
The White Paper was issued by the Department for Business, Energy and Industrial Strategy but is a government-wide initiative, with an emphasis on wide and open collaboration across the bodies of government to optimise and align the UK approach to regulation and innovation.
- The White Paper proposes a new "Regulatory Horizons Council" to report and make recommendations for priorities to support innovation, as well as co-ordinating across the various regulators, tech-focused bodies such as the Centre for Data Ethics and Innovation, and overarching regulatory bodies such as the Better Regulation Executive.
- It continues the emphasis on outcomes-focused regulation as being flexible and adaptable where businesses are seeking to take a new approach or are developing something completely new. It proposes a new "innovation test" against which proposed legislation will be assessed. It encourages the development of standards as a complement to legislation.
- It encourages regulators themselves to experiment, as well as initiatives to support experimentation by business (including considering where data sharing could facilitate market entry).
- It supports improving access for innovators to regulators, including a digital "Regulation Navigator" to aid businesses to find their way through the various regulatory regimes, and an invitation to regulators to measure their services to innovators.
- It recognises that some digital technology and its applications give rise to broader societal issues of ethics and morals, which require a broader dialogue and engagement than the usual public consultation processes. The Better Regulation Executive is tasked with developing capability in new and creative approaches to address this challenge.
- Finally, the White Paper calls for the UK to remain a global leader in developing proportionate, targeted, fair and transparent regulation for new technologies, with a number of partnerships around the world to support this. Including good regulatory practices and co-operation in post-Brexit free trade arrangements is also a goal.
Osborne Clarke comment
The velocity at which the commercial world is changing due to digital transformation is unquestionable. Similarly, it is long established that the regulatory environment in a particular jurisdiction can have a significant impact on whether innovation can thrive. The latest edition of Osborne Clarke's Regulatory Outlook explores how digital transformation is affecting a broad range of regulatory regimes, from advertising and marketing to competition, data protection and regulated procurement (amongst others).
However, the challenge is not recognising that regulation needs to adapt to technology-driven changes, but the speed with which the necessary reforms have to be undertaken, with a constant process of review and reassessment.
On the one hand, adding layers of consultation and governmental bodies to the reform process will not help the speed; on the other, it is sensible to consider which reforms should be prioritised, and to ensure that an overarching view is taken across government.
We also welcome the acknowledgment that technology throws up wider issues on which there is not necessarily a settled consensus on what the societal norms should be. The drive for wider and more creative forms of public engagement on these issues is very important, not least because public understanding of new technologies is important in itself for the success of those products.
If you would like to know more about this White Paper or any other aspect of regulation, please speak to the authors or your usual Osborne Clarke contact.